14.20 | Spring 2003 | Undergraduate
Industrial Organization and Public Policy

Readings

The course will rely heavily on the required textbook: Jeffrey Church and Roger Ware, Industrial Organization: A Strategic Approach (Irwin McGraw-Hill, 2000, 1st edition). ISBN: 0071166459. The text is denoted on the reading list as “C&W.” Occasional additional readings (typically short news articles) may be handed out in the lecture preceding their discussion. Students are encouraged to scan the Wall Street Journal, Financial Times, business section of The New York Times, or The Economist magazine for articles relevant to the topics covered in the course.

LEC # TOPICS READINGS
1 Overview & Review Overview of Course and Review of Basic Microeconomics
C&W, Chap. 1, 2, 3.1
2 Recitation: Regression Basics  
3 Monopoly & Dominant Firms Monopoly and Dominant Firms
C&W, Chap. 4

“Hard Profits: A Cement Titan in Mexico Thrives by Selling to the Poor—Cemex’s Huge Market Share Lets It Keep Prices High, Expand Around the Globe.” Wall Street Journal (April 22, 2002): A1.

4 Game Theory 1: Static Models Game Theory Introduction
C&W, Chap. 7

Non-cooperative Oligopoly: Static Models
C&W, Chap. 8

5 Recitation: Competitive Strategy Game  
7 Game Theory II: Dynamic Games Non-cooperative Oligopoly: Dynamic Models
C&W, Chap. 9, 10.3-10.4
8 Recitation: Dynamic Games  
9 Tacit Collusion: GE-Westinghouse HBS Case Cooperative Oligopoly and Tacit Collusion
C&W, Chap. 10 (remainder)

Harvard Business School Case. “General Electric v. Westinghouse in Large Turbine Generators.” 9-380-128.

10 Facilitating Practices & Cartel Introduction Cartels & Price-fixing
C&W, appendix (antitrust)

Salpukas, A. “An Oil Outsider Revives a Cartel.” New York Times, Sunday, Oct. 24, 1999, Sec. 3, p. 1.

Sotheby’s and Christy’s

11 Recitation: Dynamic Games  
12 Cartels & Price-fixing; Antitrust Law Cartels & Price-fixing
C&W, appendix (antitrust)

Salpukas, A. “An Oil Outsider Revives a Cartel.” New York Times, Sunday, Oct. 24, 1999, Sec. 3, p. 1.

Sotheby’s and Christy’s

13 Antitrust Policy: Mergers & Monopolization Horizontal Antitrust Policy- Mergers, Alliances, and Joint Ventures
C&W, Chap. 23, 19 (skim)

U.S. Council of Economic Advisors. “Realizing Gains from Competition.” Chap. 3 in The Economic Report of the President. January 2002, pp. 99-143. (this reads quickly!).

“Oligopolies are on the Rise as the Urge to Merge Grows.” Wall Street Journal (February 25, 2002): A1.

Airline Alliances: NW/CO/DL

  • DOT review.
  • Airline response: Done, Kevin. “US airlines on collision course with regulators.” Financial Times, Jan. 21, 2003.
14 Recitation: Cartels   
15 Measuring Market Power Measuring Market Power
C&W, Chap. 12
16 Oligopoly Pricing Strategies I Strategic Behavior in Oligopoly Markets
(Overview) C&W, Chap. 13

Pricing and Price Discrimination
C&W, Chap. 5

Nintendo in Europe: See the European Commission Ruling & Press Release, 30 October 2002.

Priceline: “How to Beat Priceline.” Wall Street Journal (April 9, 2002): D1.

Internet Pricing and Search: Ellison, Glenn, and Sara Ellison. “Search, Obfuscation, and Price Elasticities on the Internet.” MIT mimeo, 2001.

17 Recitation: Exam 1 Review, PS 2 solutions  
18 Oligopoly Pricing Strategies II Pricing and Price Discrimination
C&W, Chap. 5

Nintendo in Europe: See the European Commission Ruling & Press Release, 30 October 2002.

Priceline: “How to Beat Priceline.” Wall Street Journal (April 9, 2002): D1.

Internet Pricing and Search: Ellison, Glenn, and Sara Ellison. “Search, Obfuscation, and Price Elasticities on the Internet.” MIT mimeo, 2001.

19    
20 Oligopoly Pricing Strategies III Pricing and Price Discrimination
C&W, Chap. 5

Nintendo in Europe: See the European Commission Ruling & Press Release, 30 October 2002.

Priceline: “How to Beat Priceline.” Wall Street Journal (April 9, 2002): D1.

Internet pricing and search: Ellison, Glenn, and Sara Ellison. “Search, Obfuscation, and Price Elasticities on the Internet.” MIT mimeo, 2001.

21 Entry Entry, Entry Deterrence
C&W, Chap. 14, 15, 16.1

Ghemawat, Pankaj. “Capacity Expansion in the Titanium Dioxide Industry.” Journal of Industrial Economics 33, 2 (December 1984): 145-63.

22 Recitation  
23 Entry Deterrence Entry, Entry Deterrence
C&W, Chap. 14, 15, 16.1

Ghemawat, Pankaj. “Capacity Expansion in the Titanium Dioxide Industry.” Journal of Industrial Economics 33, 2 (December 1984): 145-63.

24 Predatory Pricing Predation
C&W, Chap. 21

U.S. v. American Airlines, Memorandum and Order, April 27, 2001; Brief for Appellant, January 11, 2002. See also Complaint, May 13, 1999.

American Airlines Reply to DoJ Appeal

25 Recitation  
26 Raising Rivals’ Costs Raising Rivals’ Cost
C&W, Chap. 20
27 Product Choice 1: Spatial Models & Cereal Product Choice and Differentiation
C&W, 11 (differentiation), Chap. 4.3 (durability), 6 (quality), 16.2 (switching costs)

(Background, optional): Nevo, Aviv. “Measuring Market Power in the Ready-to-Eat Cereal Industry.” Econometrica 69 (March 2001): 307-342. [Available on-line from Proquest]

“Chrysler Unveils New Warranty Deal.” Detroit Free Press, July 7, 2002.

28 Recitation: Spatial Competition Models; PS 3  
29 Product Choice 2: Quality, Durability & Networks Product Choice and Differentiation
C&W, 11 (differentiation), Chap. 4.3 (durability), 6 (quality), 16.2 (switching costs)

(Background, optional): Nevo, Aviv. “Measuring Market Power in the Ready-to-Eat Cereal Industry.” Econometrica 69 (March 2001): 307-342. [Available on-line from Proquest]

“Chrysler Unveils New Warranty Deal.” Detroit Free Press, July 7, 2002.

30 Recitation  
31 Advertising Advertising
C&W, Chap. 17

“Cigarette Makers in Discount War to Lock in Share.” Wall Street Journal (September 23, 1998): B1.

32 R&D R&D
C&W, Chap. 18

“Leading the News: Drug Study Finds Little Innovation.” Wall Street Journal (May 29, 2002): A3.

33 Recitation  
34 Internal Organization 1: Firm Boundaries Internal Organization and Theory of the Firm
C&W, Chap. 3.2-3.4
35 Internal Organization 2: Firm Behavior Internal Organization and Theory of the Firm
C&W, Chap. 3.2-3.4
36 Recitation: CSG Debriefing  
37 Vertical Structure Vertical Integration and Other Vertical Structures
C&W, Chap. 16.3-16.4, 22

“Big Tooth? Suit Says Dentsply has a Monopoly.” Wall Street Journal (April 12, 2002): A13.

38 Industry Discussion  
39 Review for Final Exam  
Course Info
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Spring 2003
Learning Resource Types
grading Exams with Solutions
assignment_turned_in Problem Sets with Solutions